Right of Rescission under Thai Law

Under Thai law, in what situations are you allowed to rescind contract? In other words, when are you allowed to terminate a legal agreement without being held to be in breach? The Civil and Commercial Code has certain rules regarding when you are allowed to exercise the right of rescission:

• First of all, you are allowed to withhold performance of your obligation under a contract until the other party performs their obligation if the performance of the other party is due. (Section 369)
• If the other party has not performed their obligation under a contract, you are allowed to set a reasonable time and inform the other party to perform their obligation within that time. If the other party still has not performed, you may rescind the contract. (Section 387)
• Where you have rightfully exercised your right of recission, both parties have a duty to restore the other to the status quo ante (“the way things were before”). Furthermore, any money you have paid to the other party must be returned with interest counting from the time the other party received the money. (Section 391)

In Thai Supreme Court Decision No. 5093/2541, Buyer decided to purchase three condominium units in a new project on Sukhumvit 71 after noticing Developer’s public advertisement. The advertisement promised various amenities, such as a telephone line and swimming pool. On January 21, 1983 Buyer entered into a sales and purchase agreement with Developer and paid a deposit of 30,000 baht and an initial installment of 520,000 baht. After a period of construction, Developer issued a notice for Buyer to receive the conveyance of ownership and to pay the balance of the purchase price. However, after inspecting the condominium, Buyer noticed that none of the amenities detailed in the advertisement had been installed, such as the telephone line, the closed-circuit television, the standby electrical generator, or the swimming pool. Buyer refused to pay and demanded that Developer install the amenities within a short period of time. However, after a period of two years, Developer still had not complied. Buyer rescinded the contract and filed a lawsuit against Developer on April 1995. The Court held that Developer’s failure to install the amenities meant that Developer still did not have the right to demand that Buyer receive the conveyance of ownership and pay the remaining balance of the purchase price. Therefore, Buyer was not in breach of contract for refusing to perform his obligation. Finally, in response to Developer’s contention that Buyer’s lawsuit was barred by the 10 year statute of limitations, the Court held that the statute of limitations started from the time Buyer rescinded the contract, which was on February 1987, not from the date that the contract was executed.

Contract law is complex. Parties to a contract are advised to consult competent legal counsel to understand their rights and obligations both under the contract and under the law.

_{Author’s note: In 2008, the Ministry of Interior passed regulations pursuant to the Condominium Act of B.E. 2522 (1979) that improved standards of consumer protection applicable to contracts between developers and buyers.}

Tags: rescission under thai law, right of recission without breaching contract, right of rescission, right of rescission under thai law, thai civil and commercial code, thai civil and commercial code section 369, thai civil and commercial code section 387, thai civil and commercial code section 391, thai contract law

Category: Civil and Commercial Law, Condominium, Litigation